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Pawn shops have been around for a long time, by some estimates
thousands of years. And much of that time they’ve probably been
regarded as lenders of last resort. But these days there’s
apparently a strong movement afoot to change that image.

Here’s part of a press release from the National Association of
Pawnbrokers called, incredibly, “Pawn Shops Save the Day.”

…the beauty of the business is not in the “stuff” being pawned
at all. The beauty of the business is in the concept that
people are helping people. Pawnbrokers are ordinary people, in
the business of offering short term collateral loans to those
who might have no other place to turn to in their time of need.

Then there’s TV – shows like Pawn Stars and Hardcore Pawn have been polishing the
image of pawn shops over the last few years. With all those
eyeballs, it’s no surprise to see pawn shops expanding and
appealing more to the mainstream – including online.

You saw me pull a snippet of a Pawngo press release in that
video. Here’s the whole thing, emailed to me on Jan. 5, 2012. It
was sent by Pawngo’s PR firm, and the twisted logic used here is
the reason I wrote this post and did the TV story above.

The holidays are officially over and now the battle to maintain
those lofty New Year’s resolutions begins. But for individuals
hoping to get their debt under control in 2012, the arrival of
post-holiday credit card statements means a mad scramble for
short term financial relief.

As such, Pawngo.com, a full service online pawn shop, has seen
a rising trend in Americans pawning their items in
order to make ends meet and paying off credit card
debt. Your interest permitting, we would like to
offer Todd Hills, CEO and Founder of Pawngo to comment on any
or all of the following topics:

Why consumers are increasingly turning to companies such as
Pawngo for their short term financial needs versus traditional
lending institutions

How Pawngo’s website traffic reflects increased activity
before and after the holiday season

The truths and misconceptions surrounding the pawn industry
as a whole and its evolution in the digital space

Stories of specific Pawngo clients who have used online
pawning to relieve a variety of financial strains

As the first full-service online pawn shop in the US, Pawngo
allows individuals immediate access to the cash they need for
life’s countless unexpected moments without leaving the comfort
of their homes. As evidence of the market for this unique
lending model, the company to-date has funded nearly $3.2
million in 49 states. Pawngo is venture-backed by Daylight
Partners, the $100 million fund started by the founders of
Groupon.

Reality check

Pawn shops serve a function; otherwise they wouldn’t exist. And I
certainly don’t have an issue with anyone making an honest
living, and that includes those in the pawn business. But let’s
stop with the Mother Teresa routine, guys. Pawn shops often
charge exorbitant interest
rates to people who are more often than not in desperate
straits. Whitewashing that fact reeks of insincerity. “The beauty
of the business is in the concept that people are helping
people”? “…allows individuals immediate access to the cash they
need for life’s countless unexpected moments without leaving the
comfort of their homes”? Give me a break.

The simple fact is that paying 3 to 6 percent interest per month
will get you into money trouble long before it gets you out, and
it should be avoided if at all possible. Here are a few better
ideas…

Maintain a budget. At the risk of stating
the obvious, learning
to save more and sticking
to a spending plan are better options than short-term
fixes like payday loans or pawn shops. Remember: Once you get
on a debt merry-go-round, it can be hard to get off.

Find another lender. Some credit unions
often offer signature loans (meaning unlike a pawn shop,
there’s no collateral needed) with rates a fraction of what
pawn shops charge. Just about any other kind of loan is better
– even credit cards. Better yet, will your boss give you a
loan? A friend or family member?

Plan ahead. If you’re the type that finds
yourself in financial hardship from time to time, make
arrangements now so if push comes to shove,
you can deal with it with the least possible hassle and
expense.

Sell your stuff elsewhere. But when you
do, don’t sell to a pawnbroker like so many seem to be doing on
TV. Whether online or off, a
pawnbroker can’t give you the retail price
of your item. They have overhead to deal with, which means
offering you wholesale, at best. Selling through a site like
eBay,
Craigslist,
or Amazon
requires a little setup and patience, but in the end you’ll
have more money.

Comparison shop. Whether you’re borrowing
or selling, online or offline, it’s always worth getting
multiple offers. Specialists are more likely to have an
accurate assessment of an item’s worth than generalists, so if
you have jewelry, for example, take it to a few jewelers before
checking pawn shops. Getting a better sense of the going rate
makes you a better negotiator, and you’ll know when to walk
away from a rip-off deal.